Naked Capitalism: The MIC, BARE and OGAM Conquer NATO

Yves Smith at Naked Capitalism has pretty good article about what is behind everything going on in Ukraine, Russia, and NATO members. America Defeats Germany for the Third Time in a Century: The MIC, BARE and OGAM Conquer NATO

Yves discusses the military-industrial complex, finance/insurance/real estate, and the oil, gas and minining complex and how they all benefit from the isolation of Russia. The article discusses some potential fallout or downsides of the situation as well. I would go so far as to say that everything presented is correct, but there is a lot of good information to keep in mind when thinking about the situation.

Excerpt:

…My old boss Herman Kahn, with whom I worked at the Hudson Institute in the 1970s, had a set speech that he would give at public meetings. He said that back in high school in Los Angeles, his teachers would say what most liberals were saying in the 1940s and 50s: “Wars never solved anything.” It was as if they never changed anything – and therefore shouldn’t be fought.

Herman disagreed, and made lists of all sorts of things that wars had solved, in world history or at least changed. He was right, and of course that is the aim of both sides in today’s New Cold War confrontation in Ukraine.

The question to ask is what today’s New Cold War is trying to change or “solve.” To answer this question, it helps to ask who initiates the war. There always are two sides – the attacker and the attacked. The attacker intends certain consequences, and the attacked looks for unintended consequences. In this case, both sides have their dueling sets of intended consequences and special interests.

The active military force since 1991 has been the United States. Rejecting mutual disarmament of the Warsaw Pact countries and NATO, there was no “peace dividend.” Instead, the U.S. policy by the Clinton administration to wage a new military expansion via NATO has paid a 30-year dividend in the form of shifting the foreign policy of Western Europe and other American allies out of their domestic political sphere into their own “national security” blob (the word for special rentier interests that must not be named). NATO has become Europe’s foreign-policy-making body, even to the point of dominating domestic economic interests.

The recent prodding of Russia by expanding Ukrainian anti-Russian ethnic violence by Ukraine’s neo-Nazi post-2014 Maiden regime aims at forcing a showdown. It comes in response to the fear by U.S. interests that they are losing their economic and political hold on their NATO allies and other Dollar Area satellites as these countries have seen their major opportunities for gain to lie in increasing trade and investment with China and Russia.

To understand just what U.S. aims are threatened, it is necessary to understand U.S. politics and “the blob,” that is, the government central planning that cannot be explained by looking at ostensibly democratic politics. This is not the politics of U.S. senators and representatives represent their congressional voting districts or states.

America’s Three Oligarchies in Control of U.S. Foreign Policy

It is more realistic to view U.S. economic and foreign policy in terms of the military-industrial complex, the oil and gas (and mining) complex, and the banking and real estate complex than in terms of political policy of Republicans and Democrats. The key senators and congressional representatives do not represent their states and districts as much as the industrial interests of their major political campaign contributors. A Venn diagram would show that in today’s post-Citizens United world, U.S. politicians represent their campaign contributors, not voters. And these contributors fall basically into three main blocs.

Three main oligarchic groups that have bought control of the Senate and Congress to put their own policy makers in the State Department and Defense Department. First is the Military-Industrial Complex (MIC) – companies such as Raytheon, Boeing and other arms manufacturers, have broadly diversified their factories and employment in nearly every state, and especially in the Congressional districts where key Congressional committee heads are elected. Their economic base is monopoly rent, obtained above all from its arms sales to NATO, to Near Eastern oil exporters and to other countries with a balance-of-payments surplus. Stocks for these companies soared immediately upon news of the Russian attack, leading a two-day stock-market surge as investors recognized that war in a world of cost-plus “Pentagon capitalism” (as Seymour Melman described it) provided a national security umbrella. Senators and Congressional representatives from California and Washington traditionally have represented the MIC, along with the Solid pro-military South. The past week’s military escalation promises soaring arms sales to NATO and other U.S. allies. Germany quickly agreed to raise is arms spending to 2% of GDP.

The second major oligarchic bloc is the rent-extracting oil and gas sector, joined by mining (OGAM) riding America’s special tax favoritism granted to companies emptying natural resources out of the ground and putting them into the atmosphere. Like banking and real estate, the aim of this OGAM sector is to maximize the price of its energy and raw materials so as to maximize its natural-resource rent. Monopolizing the Dollar Area’s oil market and isolating it from Russian oil and gas has been a major U.S. priority for over a year now, as the Nord Stream 2 pipeline threatened to link the Western European and Russian economies together.

If oil, gas and mining operations are not situated in every voting district, at least their investors are. Senators from Texas and other Western oil-producing and mining states are the leading lobbyists, and the State Department has a heavy oil-sector influence providing a national-security umbrella for its special tax breaks. The ancillary political aim is to ignore and reject environmental drives to replace oil, gas and coal with alternative sources of energy. The Biden administration accordingly has backed the expansion of offshore drilling, supported the Canadian pipeline to the world’s dirtiest petroleum source in the Athabasca tar sands, and celebrated the revival of U.S. fracking.

The foreign-policy extension is to prevent foreign countries not leaving control of their oil, gas and mining to U.S. OGAM companies from competing in world markets with U.S. suppliers. Isolating Russia (and Iran) from western markets will reduce the supply of oil and gas, pushing prices and corporate profits up accordingly.

The third major oligarchic group is the symbiotic Finance, Insurance and Real Estate (FIRE) sector is the counterpart to Europe ‘s old post-feudal landed aristocracy living by land rents. With most housing in today’s world having become owner-occupied (with sharply rising rates of absentee ownership rising since 2008 and the wave of Obama evictions, to be sure), land rent is paid largely to the banking sector. About 80 percent of U.S. and British bank loans are to the real estate sector, inflating land prices to create capital gains – which are effectively tax-exempt for absentee owners.

This Wall Street-centered banking and real estate bloc is even more broadly based on a district-by-district basis than MIC. Its New York senator from Wall Street, Chuck Schumer, heads the Senate, long supported by Delaware’s former Senator from the credit-card industry Joe Biden, and Connecticut’s senators from the insurance sector centered in that state. Domestically, the aim of this sector is to maximize land rent and the “capital’ gains resulting from rising land rent. Internationally, the FIRE sector’s aim is to privatize foreign economies, above all to secure the privilege of credit creation in U.S. hands, so as to turn government infrastructure and public utilities into rent-seeking monopolies to providing basic services at maximum prices (health care, education, transportation, communications and information technology) instead of at subsidized prices to voters.

Wall Street always has been closely aligned with the oil and gas industry, back to the days of Standard Oil. These are the three rentier sectors that dominate today’s post-industrial finance capitalism. Their mutual fortunes have soared as MIC and OGAM stocks have increased. And moves to exclude Russia from the Western financial system (and partially now from SWIFT), coupled with the adverse effects of isolating European economies from Russian energy, promise to spur an inflow into dollarized financial securities

It is more helpful to view U.S. economic and foreign policy in terms of the military-industrial complex, the oil and gas (and mining) complex, and the banking and real estate complex than in terms of political policy of Republicans and Democrats. The key senators and congressional representatives do not represent their states and districts as much as the industrial interests of their major political campaign contributors. That is why neither manufacturing nor agriculture play the dominant role in U.S. foreign policy. The convergence of policy aims of America’s three rentiergroups overwhelms that of labor and even of industrial capital. That convergence is the defining characteristic of today’s post-industrial finance capitalism. It is basically a reversion to economic rent-seeking, which is independent of the politics of labor and capital.

The dynamic that needs to be traced today is why this oligarchic blob has found its interest in prodding Russia into what Putin evidently viewed as a do-or-die stance to resist the increasingly violent attacks on Ukraine’s eastern Russian-speaking provinces of Luhansk and Donetsk…(article continues)

Tenth Amendment Center: The Constitutionality of a National Bank – Hamilton vs. Jefferson

Here another US government history article. From Mike Maharrey at The Tenth Amendment Center, The Constitutionality of a National Bank: Hamilton vs. Jefferson.

The First Bank of the United States was charted for a period of 20 years by Congress on Feb. 25, 1791. Alexander Hamilton championed the bank, but it wasn’t without its detractors. One of the most vocal opponents of the bank was Thomas Jefferson who argued that it was unconstitutional.

The debate was really about more than chartering a bank. At its core, it was an argument about the extent of federal power. Jefferson held to the promise of the ratification debates – that federal authority would remain carefully circumscribed by the enumerated delegated powers. Given that the Constitution doesn’t authorize Congress to charter corporations, much less a national bank, Jefferson argued that it was an unconstitutional act.

On the other hand, Hamilton pivoted from the position he took during the ratification debates and justified his project by invoking the doctrine of “implied powers.” His arguments foreshadowed how federal policies of every imaginable stripe would be justified moving forward. Arguably, Hamilton’s arguments for the First Bank of the United States set the foundation for much of the federal overreach we have today.

Jefferson and Hamilton both wrote documents making their cases for the establishment of the bank. Jefferson wrote his Opinion on the Constitutionality of a National Bank first.

He rested his argument on the Tenth Amendment, writing:

“I consider the foundation of the Constitution as laid on this ground: That ‘all powers not delegated to the United States, by the Constitution, nor prohibited by it to the States, are reserved to the States or to the people.’ [XIIth amendment.] To take a single step beyond the boundaries thus specially drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition.”

He then succinctly stated his conclusion.

“The incorporation of a bank, and the powers assumed by this bill, have not, in my opinion, been delegated to the United States, by the Constitution.”

Jefferson proceeded to outline the various clauses of the Constitution supporters of the bank used to constitutionally justify and explained why they failed to bear the burden of that power.

The primary justification was the Commerce Clause, but Jefferson argued that “to erect a bank, and to regulate commerce, are very different acts.” Erecting a bank actually creates an institution of commerce, and as Jefferson pointed out, “to make a thing which may be bought and sold, is not to prescribe regulations for buying and selling.”

He went on to argue that if erecting a bank is an exercise of the commerce power, it would be void because it would also impact commerce within individual states.

“For the power given to Congress by the Constitution does not extend to the internal regulation of the commerce of a State, (that is to say of the commerce between citizen and citizen,) which remain exclusively with its own legislature; but to its external commerce only, that is to say, its commerce with another State, or with foreign nations, or with the Indian tribes.”

Next Jefferson tackled the General Welfare Clause, pointing out that Congress cannot lay and collect taxes for any purpose it pleases, “but only to pay the debts or provide for the welfare of the Union.” Likewise, Congress can’t do anything it pleases to promote the “general welfare.” It can only further the general welfare by laying taxes and acting within its enumerated powers.

“In like manner, they are not to do anything they please to provide for the general welfare, but only to lay taxes for that purpose. To consider the latter phrase, not as describing the purpose of the first, but as giving a distinct and independent power to do any act they please, which might be for the good of the Union, would render all the preceding and subsequent enumerations of power completely useless. It would reduce the whole instrument to a single phrase, that of instituting a Congress with power to do whatever would be for the good of the United States; and, as they would be the sole judges of the good or evil, it would be also a power to do whatever evil they please. It is an established rule of construction where a phrase will bear either of two meanings, to give it that which will allow some meaning to the other parts of the instrument, and not that which would render all the others useless. Certainly no such universal power was meant to be given them. It was intended to lacce them up straitly within the enumerated powers, and those without which, as means, these powers could not be carried into effect.” [Emphasis original]

Jefferson drove his point home by pointing out a very inconvenient fact for Hamilton – the Philadelphia Convention debated and rejected delegating the power to charter corporations.

On one of the final days of the convention, James Madison proposed the federal government be delegated the authority “to grant charters of incorporation where the interest of the U.S. might require & the legislative provisions of individual State may be incompetent.”

Rufus King of Massachusetts objected specifically on the grounds that “It will be referred to the establishment of a Bank, which has been a subject of contention in those Cities (New York and Philadelphia). He also warned that “In other places it will be referred to mercantile monopolies.”

George Mason of Virginia proposed limiting the power to charting corporations for the construction of canals. “He was afraid of monopolies of every sort, which he did not think were by any means already implied by the Constitution as supposed by Mr. Wilson.”

Ultimately, the convention rejected the proposal completely. Historian Dave Benner wrote, “This casts overwhelming doubt on the notion that the Constitution allowed Congress to form such monopolies. No enumerated power to grant monopolies and corporate charters was ever included in the document, and during the ratification campaign, none of the Constitution’s advocates cited the presence of such a power.”

But Hamilton’s arguments didn’t rely on the existence of any delegated power. Instead, he appealed to the existence of unwritten “implied powers.”

In response to Jefferson’s appeal to the Tenth Amendment and that the federal government can only exercise delegated powers, Hamilton affirmed it, and then effectively nullified its limiting force. He wrote, “The main proposition here laid down, in its true signification is not to be questioned.” But he continued, insisting, “It is not denied that there are implied well as express powers, and that the former are as effectually delegated as the latter.”

But who decides the extent of these implied powers? Who determines their limits? In effect, Hamilton sets up an almost unlimited reservoir of power the general government can dip into in order to take whatever actions it deems appropriate. This was a 180-degree reversal from the position he took during the ratification debates when he insisted that the new general government would only exercise limited powers.

Hamilton primarily based his defense of the national bank on the “necessary and proper clause,” citing it as the source of these “implied” powers. While Jefferson relied on a very narrow definition of “necessary and proper,” Hamilton used the phrase to milk implied powers out of the Constitution.

The debate centered on the meaning of the word necessary. Jefferson took a very narrow view, arguing that the government can carry out all of its enumerated powers without a national bank. “A bank therefore is not necessary, and consequently not authorized by this phrase.”

“It has been urged that a bank will give great facility or convenience in the collection of taxes, Suppose this were true: yet the Constitution allows only the means which are ‘necessary,’ not those which are merely ‘convenient’ for effecting the enumerated powers. If such a latitude of construction be allowed to this phrase as to give any non-enumerated power, it will go to everyone, for there is not one which ingenuity may not torture into a convenience in some instance or other, to some one of so long a list of enumerated powers. It would swallow up all the delegated powers, and reduce the whole to one power, as before observed. Therefore it was that the Constitution restrained them to the necessary means, that is to say, to those means without which the grant of power would be nugatory.”

Hamilton found this view too limiting. He wrote, “It is certain that neither the grammatical nor popular sense of the term requires that construction. According to both, necessary often means no more than needful, requisite, incidental, useful, or conducive to.”

“It is a common mode of expression to say, that it is necessary for a government or a person to do this or that thing, when nothing more is intended or understood, than that the interests of the government or person require, or will be promoted by, the doing of this or that thing. … To understand the word as the Secretary of State does, would be to depart from its obvious and popular sense, and to give it a restrictive operation, an idea never before entertained. It would be to give it the same force as if the word absolutely or indispensably had been prefixed to it.”

Jefferson hit the problem with Hamilton’s view on the head. It opens up a door to virtually unlimited government power. This runs counter to James Madison’s assurance in Federalist #45 that “the powers delegated by the proposed Constitution to the federal government are few and defined.” [Emphasis added]

Under Hamilton’s “implied power” doctrine and his loose reading of the necessary and proper clause, there is very little the federal government can’t do. After all, virtually anything could be defined as “needful” or “useful” to the government. During the ratification debates, opponents of the Constitution worried that the necessary and proper clause would be construed exactly as Hamilton read it. At the time, Hamilton swore they had nothing to worry about. In Federalist #33, he wrote, “It may be affirmed with perfect confidence that the constitutional operation of the intended government would be precisely the same, if these clauses [necessary and proper and the supremacy clause] were entirely obliterated, as if they were repeated in every article. They are only declaratory of a truth which would have resulted by necessary and unavoidable implication from the very act of constituting a federal government, and vesting it with certain specified powers.” [Emphasis added]

Hamilton pivoted from “specified powers” in 1788 to “implied powers” just three years later.

In his push for a bank, Hamilton also invoked a rule of construction very favorable to the government. He wrote, “This restrictive interpretation of the word necessary is also contrary to this sound maxim of construction, namely, that the powers contained in a constitution of government, especially those which concern the general administration of the affairs of a country, its finances, trade, defense, etc., ought to be construed liberally in advancement of the public good.”

This was not “a sound maxim of construction” at the time.

St. George Tucker was an influential lawyer and jurist, and he wrote the first systematic commentary on the Constitution. Published in 1803, View of the Constitution of the United States served as an important law book, informing the opinions of judges, lawyers and politicians for the next 50 years. He explained that we should always construe federal power in the most limited sense possible.

“The powers delegated to the federal government, are, in all cases, to receive the most strict construction that the instrument will bear, where the rights of a state or of the people, either collectively or individually, may be drawn in question.”

This is the exact opposite of Hamilton’s maxim. As “Light Horse” Harry Lee put it during the Virginia ratifying convention, “When a question arises with respect to the legality of any power, exercised or assumed by Congress, it is plain on the side of the governed. Is it enumerated in the Constitution? If it be, it is legal and just. It is otherwise arbitrary and unconstitutional.”

When political power resides in the people, the default position should always be to assume the most limited government power possible – not the most liberal reading as Hamilton insisted.

Later in his life, Jefferson made a similar point in a letter to William Johnson.

“On every question of construction let us carry ourselves back to the time when the Constitution was adopted, recollect the spirit manifested in the debates, and instead of trying what meaning may be squeezed out of the text, or intended against it, conform to the probable one in which it was passed.”

There was no probable construction authorizing charting a national bank.

Reading Hamilton’s arguments for the bank, it becomes clear he was trying to “squeeze” meaning – and power – out of the Constitution. Under the limited general government promised by supporters of the Constitution during ratification, including Alexander Hamilton, there would have been no national bank.

Hamilton’s twisting of the Constitution to wring out new powers set the stage for all the federal overreach that would follow. It was the “foundation” for the “living breathing” Constitution we live under today.